JAKARTA (TheInsiderStories) – The Indonesian government’s decision to set the ceiling price of coal that is sold to the power sector under the so-called domestic market obligation (DMO) appears to have put downward pressure on coal producers’ shares.

Over the past two weeks, shares of coal prices such as PT Bukit Asam Tbk (IDX:PTBA), PT Bumi Resources Tbk (IDX:BUMI), PT Indika Energy Tbk (IDX:INDY) and PT Adaro Energy Tbk (IDX:ADRO) and others lost grounds after hit their peak in late February.

Among biggest losers were Bukit Asam and Adaro Energy. Bukit Asam shares price has fallen from a peak of Rp3,360 per share on Feb. 21 to Rp2,800 on Thursday’s (8/3) closing price, or plunged by 20 per cent. The company’s shares though were still higher compared to end 2017 at Rp2,460.

Coal Producers Shares Movement

Adaro’s shares have also trended down after hit a peak of Rp2,560 per share on Jan. 28. The company’s shares have fallen to Rp2,480 per share on Feb 21 and further fell to Rp2,190 on Thursday (8/3). Its shares has plunged by 16.90 per cent.

PT Indika Energy Tbk (IDX:INDY) shares also moved in the same pattern. The company’s shares continued to to increase since second half last year and reached its peak in late January, but then continued to move downward since then.

Indika’s shares stood at Rp3,090 at end December 2017, surged to Rp4,530 on Jan. 25, but moved down to Rp4,320 on Feb. 28 and Rp3,580 per share today. Its shares has lost 26.5 per cent since its peak on Jan. 25, 2018.

On Friday (9/3), most coal producers’ shares are still in the red zone.

The above government decision on capping the coal price for domestic power sector has triggered heated public debate over the past few months.

The debate was initially sparked by the demand of PT Perusahaan Listrik Negara (PLN), requiring the government to set floor and ceiling price of coal to be purchased by the electricity company, as the coal price continues to spike.

The reason is that PLN could not pass on the coal price hike as the government has decided to keep the electricity price unchanged until March 2019. As a result, PLN has suffered additional burden of around Rp 14 trillion ($1.02 billion) due to coal price hike.

Director Executive of the Indonesian Coal Producers Association Hendra Sinadia said coal producers through the Association have proposed the government raise the ceiling price to $85 per ton, which is still lower than the current global market price.

Today (09/03), the Indonesian Government finally decided to cap ceiling price of coal for domestic market obligation (DMO) at $70 per ton, for 6,322 calorie coal, or price is set based on the benchmark Indonesia Coal Price if the coal price moves to below US$70 per ton within two years period, Energy and Mineral Resources Ministry said.

Tito Sulistio, president director of Indonesian Stock Exchange (IDX), has critized the government’s decision, arguing that the decision has caused uncertainty to coal producers over the past few weeks.

He said the decision has been done hastily, without giving enough time for coal producers to adjust their plans.  Over the past three days alone, the market cap of coal miners shares has lost Rp11.7 trillion.

Email: roffien@theinsiderstories.com